Chapter 20 Types and Techniques of Sales Promotion-Sales and Distribu

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Chapter 20 Types and Techniques of Sales Promotion

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Types of Sales Promotions Generally, there are two major groups that offer sales promotion (our concern focuses on business activities) — manufacturers and retailers. When promotional deals are announced directly by manufacturers, these are termed as ‘manufacturer promotions’ and may be directed toward the consumers or the trade, or both these groups. Promotions offered by retailers to increase store traffic or sales, etc., are called ‘retailer promotions’ (also called as store promotions), and are offered only to customers or end- users. Price-cuts, coupons, rebates, bonus packs, exchange offers, financing programmes, etc. are examples of price appeals. The appeals of interest category include premiums, contests and sweepstakes, and free samples, etc. Sales promotions directed at the trade and sales force date back earlier than consumer promotions. Promotions are powerful competitive tools for getting new products in re-seller stores, inducing consumer trial, gaining shelf space and motivating salespersons and re-sellers.

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Sales Promotions — Tools and Techniques Price deals (price-off, price-cut, cents-off, denote the same thing) Bonus-packs (price-pack) Refunds and rebates (both terms are used interchangeably) Coupons Contests and sweepstakes Premiums In-packs, on-packs, near packs and container premiums Free-in-mail premiums Self-liquidating premiums Sampling Continuity plans Trade coupons Trade allowances and deals Exchange offers Displays, trade fairs, exhibitions and event sponsorship.

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Cont…. Price Deals Price deals are probably the most commonly used promotional techniques. A price deal for customers means a reduction in the price of the promoted product which means that the customer saves money on purchase. Such a deal is designed to stimulate customers to try a new product, to encourage new users to try an existing product, or to encourage customers to continue product patronage, increase purchase quantity, purchase multiple units, and accelerate usage rate, etc. Such deals are suitable when brand loyalty is low, product category is considered a commodity and price is the primary consideration of the customers.

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Cont…. Price Discounts Price discounts (also called cents-off deals) are communicated to the consumers through advertising, at the point-of-purchase, by listing the reduced price on the package or signs near the product or window display, or by the sales people. Such discounts may appear in newspapers, magazines and television advertisements. Similar discounts are often advertised by retailers in the local media (called feature advertising) and by manufacturers in national print and audio-visual media.

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Cont…. Advantages Flexibility and convenience of implementation. Retain present customers Offer immediate value and hence produce stronger consumer response. Accelerated purchases Since they are for a limited period and keep the consumer out of the market for a longer period, thereby discouraging competitors.

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Cont…. Disadvantages May rapidly lose its advantage if competitors announce a similar offer. Competitors are very likely to retaliate, leading to the danger of triggering a promotion war, in which no one benefits except the consumer. Such discounts are short-term and are unlikely to produce any long-term gains because the incentive is to purchase now by creating a sense of urgency. A price discount can make them suspicious about the quality of the item and they may reject the product (Don E Schultz, Marketing News, August 1990). Price discounting is the primary cause of decrease in brand loyalty.

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Cont…. Price-pack Deals Price-packs are also called value-packs. These may take any of the two forms, bonus pack and banded pack. In case of bonus pack offer, an additional quantity of the same product is offered free when the standard pack size of the product is purchased at the regular price. This type of deal is often seen in case of laundry products, food products and personal care products, etc. Banded pack offer, when two or more units of a product are sold at a reduced price compared to the regular price The products are generally banded together physically. Another variation of this technique is “buy-one-take-one-free”, or some similar offer (it could be “same for less” or “more for the same”).

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Advantages and Disadvantages Advantages: Generally effective in converting product triers into users. Extra quantity is an incentive and a reward. Consumers, who buy bonus packs of consumables, stay out of the market and are not exposed to competitors’ offers. Disadvantages The cost of the additional product may be small to the manufacturer but the cost of the larger new pack may make the offer expensive. Retailers break the banding and sell the bonus product at regular price if the product happens to enjoy brand strength. In case of consumer durables, such a deal is quite likely to hurt the brand image and disrupt price-quality perceptions of customers.

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Consumer Sales Promotion The specific consumer oriented sales promotion are following: Consumer contests: Some pitches are to be made to promote the brand of the product. For example Britannia use a pitch line tin-tin- tin-tin. Consumer Premium: The extra offers deals with the shake of the organization, discount on the product, offering extra benefits along with the product, future purchase behaviour. Trading stumps: It is deal with the future offering of the product. What extra advantages given to the particular product in compare to other competitor. Subsidised sampling offers: Final product reach into the hand of consumer with the help of retailer, mall, store home delivery or through mail. Price of offers: The consumer deals with different offers time-to-time which influence the consumer to purchase the product. It deals with the concept of larger and bigger quantity.

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Refunds and Rebates The terms ‘refund’ and ‘rebate’ are used as meaning the same thing. Long ago, the term rebate was made popular by the automobile industry in developed countries. There is a subtle difference between these two terms. The Random House Dictionary defines a refund as repayment of money, and a rebate as a return of part of the original payment for some service or merchandise. This means that a refund is repayment of total money paid for purchase, while the rebate represents repayment of only part of the money paid for purchase. However, both these terms are used interchangeably in the real world of marketing. Refund offers can induce excitement in consumers at relatively low cost.

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Cont…. Coupons Coupons can be considered as certificates offered by retailers or manufacturers that entitle the owner to some stated savings or claim the specified thing. Coupons bear a date of expiry and cannot be redeemed after the cut off date. Offer of a coupon is a very versatile technique and can be used to achieve many different sales promotion objectives. Distribution of Coupons Direct to Consumer Media Distributed Product-Distributed

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Cont…. Coupons can be used to Serve many Objectives To Encourage Product or Service Trial To Encourage Brand Switching To Encourage Repeat Purchase To Supplement Print Media Advertising To Use Price Discrimination

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Cont…. Advantages and Disadvantages Advantages: A very versatile promotion tool as they can help in inducing trial of an existing or new product. A marketer can use coupons to encourage those who have tried a brand to become regular users. It is fairly convenient to reach a large number of prospects with coupons in a short time. Coupons can help to load-up the consumers and this may help in blocking the moves of competitors when there is reliable information. Line-extension products can be introduced easily by enclosing or banding the coupon with the vehicle product.

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Disadvantages: One major disadvantage of coupons is wrong redemption. Response to coupon promotion may be unpredictable because of factors such as media, timing, value, brand share, competitive moves, etc. In-pack or on-pack coupons generally do not attract new tries. Coupons for products, whose value is unknown, generally are not quite as effective as for known and established brands.

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Cont…. Contests and Sweepstakes A sweepstake is a random drawing and is sometimes called a chance contest. This too may or may not involve the purchase of any product or service. A lottery prize is decided on the basis of chance and requires a “consideration” for entry that may be proof-of-purchase of ticket or a product. According to the American Association of Advertising Agencies, “A contest is an event that invites the customer to apply skill to solve or complete a special problem”. The same agency says, “A sweepstake does not call for the application of skill on the part of the consumer. Winners are determined by a drawing from all entry forms. In other words, prizes are awarded on the basis of chance”. Often, a combination of contest and sweepstakes is employed in some promotions. Among all the sales promotional devices, probably the most exciting and highly rewarding are the contests and sweepstakes.

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Cont…. Advantages and Disadvantages Advantages: Contests and sweepstakes can create a high level of awareness and build or reinforce the image of the product or service. Consumers may associate the impressive prizes with the product or service. The promotions are more successful in getting the print advertisement read, or the audio-visual ad seen. Contests and sweepstakes can help gain store displays, generate store traffic and encourage the trial of a product if the prizes are sufficiently attractive.

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Disadvantages: Contests and sweepstakes generally are not effective in generating trial of a new product. Heavy media expenditure is often required to make these events successful. It is generally not possible to pre-test a contest or sweepstakes programme and could prove to be quite risky. The promoter has to check thoroughly the rules and regulations that may vary from state to state. Designing a contest or sweepstakes requires lengthy lead-time.

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Premiums A premium (gift) is a reward given to the consumer for performing a particular act, generally purchasing a product or service. The premium may be free or available to the consumer by paying a price well below the regular market price. There are many varieties of premiums which are sometimes referred to as direct premiums and mail premiums. Direct premiums are used to reward the customers immediately at the time of purchase, and mail premiums require the customers to take some action, such as mailing the proof of multiple purchases to the marketer. After the receipt of the proof, the marketer sends the premium to the consumer.

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Cont…. In-pack, On-pack and Container Premiums In-pack premium: The premium is enclosed inside the product pack. Such premiums are generally small and low priced, such as a toy, steel bowl, face towel and many other items. On-pack premium: As the name suggests, on-pack premium is attached to the outside of the product package or to the product itself if no outer package is used. Near-pack premium: Sometimes the premium is bulky in size and hence cannot be enclosed inside the pack or put on the pack it is kept near the promoted product and the consumer takes one with the purchased product. Container-premium: In this type of premium the product itself is packed inside the premium, which is a container, and this container can be used for some other purpose after the product has been consumed.

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Cont…. Advantages Premiums are widely used to reward consumers. They serve as a powerful means of differentiating the offer at the point of purchase where all the products are similar and the competition is at parity. Depending on the preferences, premiums can be selected to appeal to the target groups in a market. If the promotion objective is to increase usage, some product related premium would be more useful. Near-pack premiums are a strong motivation for retailers to display the product with premium at a prominent place in the store.

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Disadvantages If the premium selection is poor, it may hurt product sales. The appeal to the consumer is an important factor and this aspect must be pre-tested in some way. This would, of course, add to the cost of the promotion. Even regular consumers may shy away from the product if the premium does not measure up to their likes. Too frequent use of premium with any product is likely to lessen the importance of the product in the eyes of the consumer.

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Cont…. Free-in-Mail Premiums Free-in-mail premiums are unique because the promotion objectives may be quite different. In-mail premiums do not provide an immediate reward at the time of purchase, as do the premiums already discussed. Consumers have to take some action to claim the premium, such as sending the proof of a single or multiple purchases and wait for some period of time for the delivery of the premium through mail or courier. A premium that serves as “dealer-loader” is a premium that is kept as display in the store and after the promotion is over, this “dealer-loader” is given to the store manager/owner free. The purpose is to reward the dealer for stocking the promoted product.

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Cont…. Advantages Free-in-mail premiums reward present consumers and encourage them to stay brand loyal and may also increase usage. Consumers will be less tempted to switch brands as they would be collecting the required number of purchase proofs to get the premium. If the objective is to encourage multiple purchases, free-in-mail premiums could prove to be quite effective because the consumers will have to build up stocks in collecting multiple proofs-of-purchase to get the premium quickly. Rate of redemption is generally low in this type of promotion and hence more expensive premium can be offered. Low redemption occurs because of “slippage” effect.

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Disadvantages It is not possible to measure the sales increase which can be directly attributed to such a sales promotion because the redemption rates are usually low. In some cases the company may be left with more residual stocks of the premium. There is need to make some agreement with the premium supplier to accept surplus stocks otherwise the cost of promotion would be unnecessarily high. There is also the possibility that the premium stocks may fall short of the demand, and unless some arrangement has been made with the supplier for such an emergency, there would be problems.

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